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Government ownership and corporate governance: Evidence from the EU

Author

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  • Borisova, Ginka
  • Brockman, Paul
  • Salas, Jesus M.
  • Zagorchev, Andrey

Abstract

The ongoing global financial crisis has led to the largest increase in state intervention since the Great Depression. Direct government ownership in publicly-traded corporations has increased dramatically since 2008. How will this increase in public ownership affect the governance of these erstwhile private companies? We examine the impact of government ownership on corporate governance using a sample of firms from the European Union, a region that is relatively familiar with active government participation. Our main finding is that government ownership is associated with lower governance quality. We further show that while government intervention is negatively related to governance quality in civil law countries, it is positively related to governance quality in common law countries. Finally, we find that the preferential voting rights of golden shares are especially damaging to governance quality.

Suggested Citation

  • Borisova, Ginka & Brockman, Paul & Salas, Jesus M. & Zagorchev, Andrey, 2012. "Government ownership and corporate governance: Evidence from the EU," Journal of Banking & Finance, Elsevier, vol. 36(11), pages 2917-2934.
    • Handle: RePEc:eee:jbfina:v:36:y:2012:i:11:p:2917-2934
    DOI: 10.1016/j.jbankfin.2012.01.008
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    More about this item

    Keywords

    Corporate governance; Government ownership; Legal origin; Golden shares;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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